Buck Creek No.1 to be a low capex, high margin coal mine

Paringa Resources Ltd has reported results of a bankable feasibility study (BFS) on the Buck Creek No.1 coal mine project in the US.

The BFS has confirmed that the coal mine will have a low capex of US$105 million, low opex FOB barge of US$29.37/short t and be a high-margin coal mine, generating EBITDA of over US$87 million (AUS$121million) per annum – even at current low coal prices.

The BFS results are based on executed sales contract with a major Illinois Basin utility. Paringa has reported that all major environmental permits received are to commence construction.

The BSF also has indicated that US based debt and equity finance discussions are progressing rapidly. Results of the scoping study for the Buck Creek No. 2 mine are due December 2015.

Commenting on the completion of the BFS, Paringa's President and CEO, David Gay, stated: "The BFS has produced an excellent result and has confirmed the Buck Creek No.1 mine to be a compelling world-class mining project, generating strong EBITDA margins of over 35% despite the current depressed coal market in general.”

"The 17% reduction in Capex to only US$105 million has also resonated well with US funding providers, and with the project's average annual EBITDA of US$87 million (AUS$121 million) per annum, has resulted in a much shorter payback period of upfront funding."

Gay continued: "Importantly for current funding activities and for investors, the BFS is based on actual contracted sale prices from the company's binding agreement with a major Illinois Basin utility and a final bidding process with a large pool of local contractors for all major Capex items. In addition, we expect the project's strong financial returns to increase even further as domestic coal markets recover.”

"With the required environmental permits already in place, the BFS was the final stage before we commence construction of the Buck Creek No.1 mine next year once funding has been finalised," concluded Gay.